The secret is out: tax-free Health Savings Accounts (HSA) is a pretty awesome way to pay for medical expenses while saving for retirement. Average HSA balances are up more than 40 percent since the beginning of the decade and Americans are using untaxed account earnings to pay for all sorts of “qualified expenses” ranging from first-aid supplies to prescription medications to, yes, stop-smoking programs. But strangely, people breaking the smoking habit can’t use their hard-earned HSA dollars on quit-smoking aids such as heat-not-burn products and e-cigarettes proven to be nearly twice as effective as any of the covered programs. These products have saved millions of lives, yet the Internal Revenue Service (IRS) bureaucrats refuse to acknowledge their proven benefits. By leveling the tax playing field, the federal government can give millions of smokers a chance to save their lives.
When HSAs first debuted in 2004, knowledge of these obscure tax-free accounts was limited to a handful of sophisticated accountants. Today, more than 26 million Americans of (nearly) all ages have opened up accounts, contributing and spending billions of dollars each year. But having an account is no guarantee that the owner will be able to discern qualified versus non-qualified expenses. Even eligibility lists offered by different websites sometimes contain discrepancies, resulting in healthcare consumers having to second-guess their purchases. This can be a harrowing experience for the millions of Americans who smoke combustible cigarettes and are desperately trying to find a safe alternative to their deadly habit. Stop-smoking programs are covered by HSAs, but program results are unpredictable and costs can range as high as $100-150 per class.
On top of that, participants may have to shell out for additional items such as nicotine gum, patches, or nasal sprays (which may be covered by HSAs if prescribed as part of a stop-smoking program). Smokers looking for an alternative that doesn’t involve this time and monetary commitment can take up vaping or start using heat-not-burn devices. Research published in the Journal of the American Heart Association backed up these claims, finding, “those who used e‐cigarettes to quit combustible cigarettes had an increased probability of persistent cigarette abstinence and that daily e‐cigarette users were more likely to quit smoking or reduce their use of combustible cigarettes compared with nonusers.”
These benefits come with minuscule risks, as these reduced-risk products are more than 95 percent safer than cigarettes according to research repeatedly reaffirmed by Public Health England (a part of the U.K. government). The Brits have largely internalized these findings and set up accommodative regulatory policies that have helped up to 70,000 English smokers per year kick cigarettes. But the U.S. government remains stubbornly committed to an anti-vaping crusade that has resulted in needless flavor bans by the Food and Drug Administration and e-cigarette taxes nationwide.
Allowing the purchase of these products with HSA dollars would be a useful first step toward encouraging millions of smokers to embrace safer alternatives. It would also go a long way to defray some of the ludicrous state and local taxes hoisted on these life-saving technologies. For example, the District of Columbia levies an astronomical 96 percent wholesale tax on vaping products. With HSA eligibility, buyers could at least pay for these taxes with dollars spared from federal income tax.
But the best part of granting HSA eligibility to harm-reduction technologies would be side-stepping the sham “youth epidemic” of vaping cited by “public health” organizations such as the Robert Wood Johnson Foundation. There’s been frequent fear-mongering by these groups that teenagers are getting hooked to e-cigarettes, yet detailed survey data shows that only 1 percent of students that never used tobacco are frequent vapers. The teenagers that do vape tend to be smokers making the switch away from cigarettes, which explains historic declines in tobacco consumption among adolescents. But notwithstanding these facts, pro-harm reduction HSA policy wouldn’t impact teenagers because…virtually no teenagers have HSAs.
According to George Washington University Medical Center, if a majority of smokers quit smoking through the use of e-cigarettes and heat-not-burn devices over the next ten years, over six and a half million American lives would be saved.
Lawmakers and IRS bureaucrats can encourage these life-saving technologies by expanding the scope of HSAs for millions of account holders. With some small tax tweaks, millions of smokers can finally kick their deadly habit.
Catalyst articles by Ross Marchand